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Starting in Firefox 3, downloads of executable files (e.g., .exe or .msi) may fail and the Firefox Downloads window will contain this message, under the filename:This download has been blocked by your Security Zone Policy.

This issue occurs because Firefox 3 now honors your Windows security settings for downloading applications and other potentially unsafe files from the Internet.</blockquote>

The rage here is that the Internet Options you see from the Control Panel links back to Internet Explorer 7.
So in a round about wacky way, Firefox 3 follows IE7 s security settings.
Need a fix?
<blockquote>

To change the setting, open Internet Options (via Control Panel or from Internet Explorer -&gt; Tools) and click the Security tab. With the Internet zone icon highlighted, click the Custom level button. A list of security settings for the Internet zone will appear. Find the Launching applications and unsafe files setting (under Miscellaneous) and select Prompt (recommended) .